Soma Talukdar
Taking out a loan is the fastest and most reliable method to take care of all your financial problems. The application process is easy, the approval is swift, and there is minimal documentation required. Now personal loans are not new, and many people are aware of the same but did you know that there are different kinds of personal loans—each designed for a specific purpose in mind. We look over some types of personal loans that you can use to get over a financial crunch.
This type of loan requires the borrower to give lender some security deposit. It can be anything that carries some financial value like your car, house, jewelry etc. The lender can take possession of the borrower’s asset if the latter defaults against the loan taken. It is to ensure the bank or the lender has security, and the borrower can enjoy the lower rate of interests on his or her loan. Most long term loans come under this type of loan, and this type of loan is also easier to obtain as compared to others.
Unlike the former, an unsecured loan does not require the borrower to put an asset as a security measure. Therefore, you won’t have to give away asset if you default. Obtaining this is difficult and you will have to convince the lender that you will be able to repay the loan completely by showing him or her some proof of your income pay slips etc. Follow here
for advice on unsecured loans.
As the name suggests, interest rates can frequently change according to the repaying loan schedule. Personal lines of credit for example come under this category of loans. Therefore, when you are applying for a personal loan, it is essential to check whether your personal loan has fixed rate of interests or variable ones.
This kind of loan is designed for specific purposes, and therefore only specific amounts can be borrowed and repaid in equal installments periodically over a predetermined repayment schedule. Installment loans can be both unsecured and secured and some of the examples of the same can be home equity loans, mortgages etc. The interest rates here are fixed and most people who take out this loan are looking to spend the same on a single, one-time expense like paying off their medical bills or remodeling their house.
A long-term loan is a loan taken for higher amount and for a good number of years, generally more than five years. Mortgages, student loans, starting of business loan and home improvement loans are some of the long term loans. These loans are quite different to the other loans discussed here as the financial history and credit rating of the borrower along with their income is very important here. With a good credit rating, the borrower can have a really good interest rate and lower instalment.
The other aspect of long-term loan is the collateral. Here the bank needs assets they can take back to recover the loan amount in case of a default.
Short Term Loans or payday loans are strictly meant to be repaid after a short time duration (under three years). These are generally the unsecured type of loans because the amount to be borrowed is not that high. While applying for short-term loans, check the interest rates, balance transfer fees and introductory rates of interest.
